I went to Pirangut with a plan to enjoy a few songs and come home by 8.30 pm. But, I attended the complete live performance of Bela Shende!

More than the live performance of Bela, my main interest was number of bookings at Sunshine Joy. So, I went a little early. But, instead of visiting the sales office, I went on admiring the arrangement of the live concert and observing technicians & musicians testing their equipment & instruments.

I met Mr. Sameer Desai, Director of Seagull Advertising. I gave him compliments for 'creative' conceptualization and 'excellent' execution of the event. But, didn't ask him about the response to the launch offer of Sunshine Joy!

At last, when I met Mr. Manish Kaneria, Director of Mont Vert Homes, I realized why I was there and asked him, "How is the response? Happy?"

"Happy & surprised. Demand is more for the 2 BHK Flats!," said Mr. Kaneria and went ahead to welcome some local dignitaries.

There was a small crowd of property buyers in the pandal. When I took out my camera, Ms. Smita, the sales office, said, "Please, do not take my photo. I must be looking tired and untidy. There was too much rush during the last two days!"

Then began the live performance. Abhijeet Khandkekar, the anchor of the show, came on the stage and said he is half Punekar. Now, almost all the chairs were occupied. Still visitors were coming in. So, they added a few more chairs.

When Bela started singing, I forgot that I had planned to leave early. One more song and I am out, I went on promising myself. The last bus is at 11.15 pm, I told myself. No need to hurry. After all, Pirangut is just an extension of Kothrud!

Most people in India are convinced that real estate is a great asset. More caution is in order. Real estate investment is not a guarantee of profit. It is hard to be diversified, and illiquidity hampers portfolio structuring. Most important, the outlook for supply over the medium term implies that there is no great upside.

Too many intelligent people in India believe that one can never do wrong by investing in real estate. Some claim that India has a large population and there is a shortage of land. A little arithmetic shows this is not the case. If you place 1.2 billion people in four-person homes of 1000 square feet each, and two workers of the family into office/factory space of 400 square feet, this requires roughly 1% of India's land area assuming an FSI of 1. There is absolutely no shortage of land to house the great Indian population.

The biggest story about the future of real estate prices in India is the `floor space index', FSI, or rules that restrain building into the sky. In most of India, the FSI is below 2. This is an abysmally small number by global standards. All over Asia, FSIs are above 5, going up to 20 or to no limit. In the long run, politicians in India will see the light and FSI will rise. A higher FSI results in lower rental rates for households and firms, as was seen in Hyderabad which was a pioneer in FSI reform. When FSI goes up, this will unleash supply on a big scale. As an example, if Bombay moves from an FSI of 1 to 2 -- which would still make it worse than the FSI seen anywhere else in Asia -- this would trigger off a doubling of supply.

These arguments are not specific to India. While datasets about real estate investments over long time periods are not easy to come by, academic evidence is slowly building up of fairly poor returns to real estate. Net of inflation, real estate tends to produce roughly 0 over long periods, while equity indexes produce significant and positive returns after inflation.Finally there are the practical difficulties of diversification and liquidity. Most people are not rich enough to buy 50 properties spread across India. Buying and selling involves very large transactions costs and delays, and generally involves black money.Skepticism is in order. If less than 1% of the land area of India is built out, this is enough for the entire population. There is no long-run return in hoarding bricks and steel. Real estate booms the world over are quenched by supply. The prospect of holding real esate in India is worse because FSIs are tiny. In the future, FSIs will go up, which will further fuel supply. Households investing in real estate are also hurting on account of inadequate diversification, illiquidity and the use of cash.

Very true ... pune (un)realestate has already run into an overbought zone. One can imagine a situation when FSI has increased and also todays "smart investors" are wanting to sell or book-profits..... :)